FHA Loan

An FHA Loan, which stands for a Federal Housing Administration Loan, is administrated by lenders, but backed by the federal government. The FHA-insured loans encourage lenders to extend credit to borrowers who might not qualify for conventional home loans. 

Pros:

1. 3.5% down payment minimum
2. Allows buyers who may not qualify for a home loan to obtain one low down payment
3. Sell can pay all of the closing costs and prepaids up to 6% of the sales prices as part of the negotiations of the contract
4. Interest rates are typically less than conventional loan
5. More flexible in credit and past financial history

Cons:

1. Lifetime monthly MIP
2. Upfront MIP fee that is rolled into the noteMonthly
3. Monthly MIP is higher than conventional loan
4. Size of the loan could be limited